Economists and commentators are increasingly citing Wile E. Coyote to explain the macro economy, with Nobel-laureate Paul Krugman first hoisting the anvil in 2007. Cartoon image courtesy of Warner Bros. Animation. Graphs courtesy of Project X.

Throughout the last two years the worldwide economy has deteriorated significantly; whatever caused this, and who, is most likely of less concern to the animation community than the impact on the future of our particular bailiwick. Will the macro economy stabilize without too much more extreme pain and soon return to rosy health? Will the Obama stimulus package work as hoped? And as Treasury Secretary Timothy Geithner's latest plan goes forward, have we saved the banking system from itself, or is PPIP (Public Private Investment Program -- released last month) just another acronym on the road to something else (like BRIR -- Banks Really In Receivership), and soon to be consigned to the ash heap of history like the too-late, too-unfocused, too-much-in-favor-of-the-bankers programs from his Bush-appointed predecessor Hank Paulson? Most important, will the animation industry thrive and prosper?

There is every indication, but no guarantee, that The World as We Knew It will continue with some modification as The World We Will Come to Know. Definitely not as much glitz as the last two decades, most certainly with far too much pain in the near future, but the collapse of capitalism is not at hand. If the panics of 1873, 1893 and 1907 as well as the Great Depression didn't do it, what we're in now won't either. There will be changes (e.g., barring the bank door after the assets have fled), but our favorite yet bloodied vertically-integrated media conglomerates will survive and flourish again in the near, or more likely distant, future.

The World as We Knew It is driven by consumer revenue, about 70% of U.S. Gross Domestic Product (GDP) by recent figures, and this is especially true of animation. All the money that comes into entertainment animation (features, games, TV, online) can be traced back to the consumer: box office, DVDs, game software sales, MMOG/MMORPG ad revenues and fees, L&M tchotckes, advertiser support, cable network subscription fees, you name it. No matter where this money appears to originate, it essentially comes from the pocket of some consumer, and the consumer isn't feeling so great right now, nor are many businesses whose lifeblood is consumer sales.

The ratio of Debt-to-GDP is now higher than during the Great Depression.

The World as We Knew It floats on a sea of U.S. domestic credit, tens of trillions of dollars of it ($50,000,000,000,000 plus), approximately four times larger than our yearly GDP -- an amount of debt nearly uncountable (and to many, unimaginable in size): mortgages and home equity loans, car loans, credit cards, student loans, business loans, municipal and corporate bonds and other familiar debt obligations, some governmental, but overwhelmingly private. The swirling foam on this sea of debt is asset-backed securities (ABS include CDOs, CLOs, CMBSs, CMOs, RMBSs, ad infinitum, a you-don't-want-to-know-what-they-are alphabet soup), which are now called "legacy assets" by the Treasury but were known until recently as "toxic assets" -- as toxic they indeed are, having poisoned the banking system and bringing it to near paralysis.

And the wind-driven froth on that foam is the credit default swap (CDS), unregulated and unmonitored quasi-insurance on those multiple forms of debt (perhaps better stated as a naked gamble, with supposedly rock-solid PhD'd risk analysis that turned out not quite as solid as your local bookie's). An in-house CDS gambling den was directly responsible for the largest single financial failure in history, AIG, of course, at a current cost to us of nearly $200 billion, including the infamous bonus pool -- which is actually miniscule in comparison to the total (less than 1 one-thousandth or < .001) and a perfect example of how we sometimes focus on the biting gnat while ignoring the rampaging elephant.

The World as We Knew It generates massive wealth, but it appears that throughout the Bush years it mainly benefited those in the financial industry, reminding me of an apocryphal bon mot: The real work of Wall Street is to transform middle class pension funds into the bankers' bonus pool. It seems to have been the case in the recent bull market and credit bubble: $2 trillion in fees comes close to matching the current estimate of repairing the banking system.

The World as We Knew It thrives on international trade, both goods and services, including runaway production. International trade isn't doing so well these days: unsold imported cars are being stored anyplace there's flat land, Japanese exports in February were down 50% year-over-year, Port of Los Angeles container traffic (TEU count) was down 35% over the same period and the Baltic Dry Index (trust me, it's the metric of international shipping costs) fell more than 90% before recovering (the dreaded dead cat bounce) to settle at minus 80% or so. I could go on, and on, but I think you get the idea.

The World as We Knew It is a glutton for fossil fuels, and peak oil is real. The current recession is masking peak oil artifacts; any return to economic "normality" will bring them forward again. As I write this, the West Texas Intermediate Crude Oil (WTI) price is already up 50% from its low earlier this year; it will fluctuate, it may actually drop to new lows, it will go up over the long term. Its inexorable rise will (as it did last summer) pinch the consumer, and not fondly.

The World as We Knew It gives us bearable 5% unemployment and reasonable 3% GDP growth per year; both are gone for the near term. Prognostications are all gloomily downside, so the March 2009 Congressional Budget Office (CBO) set for the next 12 months is as good as any other: minus 3% GDP this year, with unemployment peaking at 9% early next year; both figures include the modifying effect of the stimulus inputs. (Unfortunately, for the many members of the animation community in California, the unemployment rate there is already 10.5% and may well hit 12% or higher -- that hurts.) Any macro economic projections beyond 12 months are, to me, winging it into unfathomable territory; there are just too many critical factors oscillating to strange rhythms, and there will be many surprises to come.